JB Maina, M-Shwari Updates: Safaricom’s Copyright Battles Continue

Safaricom House

As many may already know, Safaricom, the largest mobile telecommunications company in Kenya is currently embroiled in a handful of intellectual property (read: copyright) law suits, with creators and innovators alike. See full list here. Recently, there have been some new developments in two of these cases, namely the M-Shwari and JB Maina cases.

To recap briefly, the M-shawri row arose late last year when Faulu Kenya claimed that it had pitched to Safaricom the idea of a mobile money service that allows users to save, borrow loans and earn interest using their mobile phones. On the other hand, the JB Maina case has been in court since 2010 when Safaricom was accused of copyright infringement in respect of musical works of JB Maina alleged to have been uploaded on Safaricom’s portals.

The Daily Nation now reports that the Court has declined to grant Faulu Kenya’s application for an interim injunction pending determination of its suit for breach of copyright and violation of trade secret. While this blogger is inclined to agree with this preliminary ruling by Justice Havelock, several concerns the learned judge’s reasoning on this case were raised.

Turning to the JB Maina case, a recent court ruling reported in full here has awarded limited Anton Piller orders to the plaintiff, JB Maina against Safaricom. The effect of these orders is that it allows JB Maina in the company of a copyright inspector to enter Safaricom’s premises, inspect its machines, take records, make copies of records for purposes of gathering and preserving evidence necessary to prove his claim. The court has also granted JB Maina a temporary injunction restraining Safaricom from dealing in JB Maina’s works, in addition to awarding JB Maina the costs of the motion to be paid by Safaricom.

This blogger will revisit this return of Anton Piller orders in Kenya’s IP litigation landscape in a subsequent post. However for the purposes of the JB Maina case, there are a couple of interesting questions that this blogger believes must be at the back of Safaricom’s mind. The first question is whether there is need to have such a complex web of relationships between the right holders (copyright owners); the music collecting societies (the copyright assignees); the content service providers and/or premium rate service providers (the middle men); and itself as a major user of copyright works. This first question requires Safaricom to think hard about eliminating the middle men altogether so as to deal directly either with the music collecting societies or the copyright owners themselves on an exclusive basis. The second question which flows from the first is whether the acts currently performed by Safaricom in respect to musical works and sound recordings ought to be licensed in the first place. This second question arises based on the various unlicensed rights currently being exploited by Safaricom, namely reproduction, communication to the public in addition to the performing right in the musical download.

At the very least, it is hoped that the final conclusion of both these Safaricom copyright suits may provide useful IP jurisprudence that will help settle some of the unanswered questions in Kenya.

Judge Erred on Intellectual Property in Faulu Kenya vs Safaricom M-Shwari Case

JONATHAN BOWEN JB HAVELOCK DN

This blogger, in an earlier post, had expressed optimism and hope in Mr. Justice JB Havelock’s ability to preside over this high-stakes intellectual property (IP) case with clarity and wisdom.

Recently this hope has been somewhat dashed by what can only be termed as a gross and unfortunate oversight by Judge JB Havelock in a ruling he made on 20th December, 2012.

A copy of this ruling is available here.

At paragraph 12, the learned judge claims that he “really cannot see that the plaintiff’s concept paper.. qualifies” as per the interpretation section the Copyright Act, which defines inter alia the various categories of copyright works. Havelock even goes further to reproduce the entire definition of “literary work” under the Act and yet shockingly admits:

Try as I may, I do not seem to be able to fit the Plaintiff’s said concept paper into any of these categories…

Reading this section of the ruling, one is left wondering why the learned judge would chose to ignore the words “works similar thereto” in the definition of literary work. It is clear that a concept paper is a literary work in the proper interpretation of the Act. In light of the above, one is left doubtful whether the judge will be able to address the elephant in the room of this case, namely the idea/expression dichotomy and the limits of IP protection for Faulu Kenya’s creation.

This blogger has since done some background research on the learned judge and discovered yet another gross misinterpretation of the Copyright Act.

In a previous life Mr. Jonathan Bowen Havelock was Partner at Havelock, Muriuki & Raval Advocates and was advising Southern Cross Safaris Limited in a matter involving Music Copyright Society of Kenya (MCSK). There were two main issues raised: 1) Does the playing of a FM radio station in a public service vehicle constitute infringement of a copyright? and 2) What is the nature and scope of MCSK’s mandate?

In an opinion to Southern Cross dated August 4th 2008, Havelock wrote:

“it is quite clear from section 26 and 27 that the copyright license is obtained by the broadcasting authority and not by the end-user. The client is, in this instance, an end-user.”

This remark is indeed appalling and misleading in that it fails to distinguish between two distinct types of commercial exploitation of musical works under copyright, namely: broadcast and communication to the public.

Section 2 of the Act reads as follows:

“communication to the public” means –
(a) a live performance; or
(b) a transmission to the public, other than a broadcast, of the images or sounds or both, of a work, performance or sound recording;” (Emphasis mine)

Section 2 of the Act also defines “broadcast” as:

“the transmission, by wire or wireless means, of sounds or images or both or the representations thereof, in such a manner as to cause such images or sounds to be received by the public and includes transmission by satellite;”

From the sections referred to by Havelock, there is a clear distinction made between private and domestic use and other uses where revenue is generated. Therefore in the case of a PSV, there can be no doubt that the use of musical works is commercial in nature. In line with the definitions above, the PSV’s exploitation of musical work is not a broadcast but rather a communication to the public or public performance. It thus follows that both the broadcast and the public performance form part of the copyright owner’s economic rights and all other users must be licensed as plainly spelled out in the Act.

On the question of MCSK’s mandate, Havelock wrote:

“..for MCSK to be able to fulfill its mandate, it would have to have entered into an agency contract with each individual performer, whose performance it seeks to protect”.

One wonders why the Havelock failed to take cognisance of the fact that musicians sign a deed of assignment with MCSK on their registration as members, which allows MCSK to control their public performance and reproduction rights in respect of their musical works as declared to the Society.

To sum up, this blogger submits that Kenya’s Judiciary must be continuously trained on all aspects of IP, not just copyright and related rights. The Judicial Training Institute must reach out not only to the governmental IP agencies but also to institutions like CIPIT who are better placed to impart on judges and magistrates both theoretical and practical knowledge of the various branches of IP and its application both locally and internationally.

The Ghost of M-Pesa: Faulu Kenya Cries Intellectual Property Theft over Safaricom’s M-Shwari

In a recent news article titled “Safaricom loses first round of M-Shwari row with Faulu”, it is reported that Mr Justice Jonathan Havelock, sitting in the High Court, made the following two determinations in respect to Faulu Kenya’s suit against Safaricom’s M-Shwari:

1. The court denied Faulu Kenya’s request that Safaricom be barred from any dealings in the M-Shwari service until the former’s case is heard and determined.
2. The court rejected Safaricom’s bid to have Faulu Kenya’s bid moved to the Industrial Property Tribunal and stated that it had jurisdiction to hear and determine the case.

To recap, Faulu Kenya filed a lawsuit last week in the Kenyan High Court seeking to halt Safaricom from operating M-shwari, arguing that it is similar to its Kopa Chapaa service, which has been in operation since last year in partnership with Indian mobile operator Airtel Kenya. Faulu Kenya claimed that it had pitched to Safaricom the idea of a mobile money service that allows users to save, borrow loans and earn interest using their mobile phones.

During this pitch, Faulu Kenya alleges that it presented to Safaricom a prepared concept paper detailing how the platform was going to operate. Faulu Kenya also claims that it entered into a non-disclosure agreement with Safaricom, which it claims that Safaricom disregarded when it developed and launched the M-Shwari product. However Safaricom now claims that it had knowledge of a similar product to Faulu Kenya’s, having signed a pact with Commercial Bank of Africa (CBA) eight days before the Faulu agreement.

Safaricom has made a lengthy statement on this matter via their official site, which reads in part:

“While this matter is already in court and is therefore subject to sub judice rules, Safaricom Ltd seeks to clarify that M-Shwari is a proprietary product of Safaricom Limited which is the successful result of a 2-year product development process.

As you are aware, Safaricom Ltd has had a strong focus on Financial Inclusivity since 2007, when it launched M-Pesa. The commitment has been sustained through relevant enhancements informed by proactive research into user habits, dynamic customer needs and emerging trends, relating to the use of M-Pesa and other mobile finance solutions.

In developing M-Shwari, Safaricom Ltd and the Commercial Bank of Africa followed the due legal process as required by the Laws of Kenya.

As Kenya’s leading integrated communications company, Safaricom has consistently worked hard to conceptually develop innovative solutions for all Kenyans. As a result Safaricom has built an enviable intellectual property portfolio.

While the allegations are lamentable and unfortunate, Safaricom will seek to have the matter resolved through the right legal processes. We believe that this law suit is tainted with malice because it is founded on untrue allegations(…)”

Comment:

Certainly, this latest row between Faulu Kenya and Safaricom is reminiscent of previous intellectual property (IP) disputes surrounding Safaricom’s flagship M-Pesa product. As one commentator rightly notes, everytime Safaricom launches a new M-product, an “intellectual property” lawsuit is not too far behind therefore such suits are “all part of the cycle of an m-product”.

Fortunately, the learned judge, Mr. Jonathan Havelock did not fall into the trap of his learned sister Lady Justice Joyce Khaminwa, who was persuaded by Safaricom to make a ruling in the M-Pesa litigation that the High Court had no jurisdiction to handle the matter directing that the litigant Mr Christopher Ondieki ought to file his suit at the Industrial Property Tribunal.

This blogger submits that if this litigation proceeds to its full conclusion, Hon. Justice Mr. Jonathan Havelock will have the rare opportunity to, once and for all, provide Kenya with useful jurisprudence on the nature and scope of intellectual property protection, with a clear emphasis on the copyrightability of mobile-based ICT innovations, the oft-misunderstood idea/expression dichotomy and perhaps the patentability of M-products generally.

This may also be a worthwhile opportunity for the learned judge to examine both M-Shwari and Kopa Chapaa and determine whether both products can co-exist in the market bearing in mind Kenya’s new laws on competition and the alleged existence of a non-disclosure agreement signed by both Safaricom and Faulu Kenya.

All in all, this is a case that we will all be following keenly as it now proceeds to the hearing stage.